Sky, TalkTalk, Vodafone Letter Urges Ofcom To Launch Openreach Inquiry

Steve McCaskill is editor of TechWeekEurope and ChannelBiz. He joined as a reporter in 2011 and covers all areas of IT, with a particular interest in telecommunications, mobile and networking, along with sports technology.

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Telcos and Institute of Directors say current structure is harming UK’s development and want Competitions and Markets Authority to intervene

A number of BT’s rivals and the Institute of Directors (IoD) have signed a letter urging Ofcom to ask the Competitions and Markets Authority (CMA) to undertake an investigation of the UK communications market with a view to separating Openreach from BT.

The chief executives of Sky, TalkTalk and Vodafone are among the signatories, as are their counterparts at the Association of the Independent Professionals and the Self-Employed, the Federation of Communications Services and the Independent Networks Cooperative Association.

They claim the market is failing UK businesses and consumers because BT’s continued ownership of Openreach is not stimulating enough competition to deliver rural coverage, ultrafast broadband and adequate levels of service.

Read More: The battle for the future of UK communications

Openreach separation

BT Tower“Today’s broadband market is letting customers, businesses and Britain down. It is time we considered radical reform,” said the letter, published in the Financial Times.

“[Problems] include a conflict of interest in the role of BT, poor quality of customer service and difficulties in enforcing the existing regulatory regime. The result is a substandard experience for millions of customers and diminished opportunity for alternative providers to compete effectively.”

The letter claims Ofcom’s once-in-a-decade review of the communications market recognises these perceived problems. However the regulator has only said a formal separation of BT and Openreach is one of a number of proposals being considered and that the status quo or even further de-regulation could occur.

But BT’s opponents are adamant the company has too much power in the fibre market and feel any changes to regulation would not alleviate their concerns.

“We do not believe the fundamental problems identified by Ofcom can be addressed by tinkering with the regulatory framework,” the letter continued. “Ofcom has done a good job of delivering competition on the old copper network, but the powers given to it are insufficient for the new superfast world.

“It is therefore crucial that Ofcom moves as quickly as possible to ask the Competition and Markets Authority, with its far reaching powers, to undertake a full market investigation. Only the CMA, with the support of Ofcom, can address the structural barriers to competition that will unlock the next wave of investment in communications infrastructure that the country urgently needs. We cannot afford to wait.”

BT response

Sky and TalkTalk have been among the most vocal calling for Openreach to be made an independent company and claim it would immediately become a FTSE-100 firm capable of investing in network infrastructure without having to compete for funding within BT and supporting the aims of its retail division.

BT has continuously argued against the separation of Openreach and says the current structure has resulted in investment in fibre broadband that would not have occurred otherwise.

“BT has invested £10.5 billion of capital into Openreach over the past ten years and last year we invested more than ever before. This year, our investment in Openreach will be even higher,” a company spokesperson told TechWeekEurope. “That has helped put the UK ahead of its European peers when it comes to superfast broadband coverage, speeds and prices – and we have outlined plans to go even further and faster.

“We acknowledge that there is more to do on customer service, but Openreach is exceeding all sixty of the service targets set by Ofcom and breaking up BT is not the answer. It would lead to huge uncertainty and fundamentally undermine the case for future investment, dragging the UK backwards at the very time it needs important investment in its infrastructure.”

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